ITC Says it Has the Power to Stop Infringing Transmissions of Digital Materials

March 13, 2015

ITC Litigation

ITC Says it Has the Power to Stop Infringing Transmissions of Digital Materials

March 13, 2015

The International Trade Commission has filed its response brief in the appeal pending before the Federal Circuit in ClearCorrect Operating, LLC v. ITC, No. 2014-1527 (Fed. Cir. 2015). The appeal, stemming from USITC Investigation No. 337-TA-833, presents the Federal Circuit with the question: May the ITC issue a cease and desist order to prevent an infringer from transmitting certain digital materials into the United States? The ITC argues that such digital materials qualify as “articles” within the meaning of section 337 and asks the Federal Circuit to affirm its issuance of a cease and desist order in the Investigation. Such a holding could expand the reach of the ITC and has many software companies and internet service providers worried.

The technology at play in the underlying Investigation were digital models for making custom dental appliances to straighten teeth. The appliances claim to be superior over conventional braces because they achieve the same result, but in less time and in a manner more comfortable and discrete for the wearer. This result is possible because the appliances are created specifically for the wearer by utilizing digital models of the wearer’s teeth.

Patent holder Align Technology and accused infringer ClearCorrect practice this technology. For example, ClearCorrect sends physical models of a patient’s teeth to its outfit in Pakistan, where ClearCorrect generates a series of digital data sets based upon the patient’s teeth. ClearCorrect’s Pakistani subsidiary uploads the digital data sets to a United States server, where a 3D printer produces the dental appliance based on the data sets.

Align argued—and the Commission agreed—that ClearCorrect infringed two groupings of Align patents, each on a different theory. The first Align patent grouping claimed methods for making the appliances themselves. The Commission determined that ClearCorrect US’s production of the appliance directly infringed and ClearCorrect Pakistan’s digital transmission contributed. The second Align patent grouping claimed methods for making the digital data sets. The Commission determined that ClearCorrect was therefore liable for importing a product created using a process patented in the United States. The Commission entered a cease and desist order—although, significantly, not an exclusion order—prohibiting ClearCorrect from “importing (including through electronic transmission)” the digital data sets. ClearCorrect appealed the order as exceeding the ITC’s authority under section 337.

The question in the appeal, as framed by the ITC, is whether the digital data sets are “articles” within the meaning of section 337. In defending its order, several themes emerge in the ITC’s brief. First, the ITC frames the case as being about whether digital files are “articles,” but not about whether digital transmission is an importation. Also, the ITC stresses that the circumstances under which it issued the cease and desist order in this Investigation are highly-fact dependent. Namely, the ITC emphasizes the direct link between the digital data sets and the dental appliances, arguing “[T]his is a case about teeth. Specifically, it is a case in which ClearCorrect hoped to skirt U.S. patent law though 3D printing in the United States of the digital models it imported.”

The backbone of the ITC’s argument relies upon what the ITC considers to be the broad discretion Congress bestowed upon it in passing section 337. By tracing the legislative history of section 337, and even its predecessor section 316, the ITC argues that Congress intended to vest the ITC with remedial power sufficient to exclude a sweeping category of goods. The ITC makes this argument in spite of amici who argue that Congress’s silence on transmissions—which existed in the form of telephonic transmissions at the time Congress enacted section 337—equates to a lack of ITC jurisdiction.

The ITC cites to court decisions supporting a broad interpretation of “articles.” Harkening back to a decision in 1940 by the Federal Circuit’s predecessor court, the ITC relies on language used to describe articles as “any provided-for substance, material or thing of whatever kind or character that was imported into this country.” The ITC also cites non-patent cases where the Supreme Court has interpreted “articles of commerce” to include driver information made available for sale with respect to the Constitution’s Interstate Commerce Clause.

Interestingly, the ITC admits that it could not have issued a ban on digital transmissions of the data sets using its traditional remedy: the exclusion order. Speaking to this point, the ITC states “That section 337 calls for exclusion orders—which would not cover the importation of these digital models—is of no moment.” (emphasis added). However, the ITC argues that its power under a cease and desist order is often more powerful than its power under an exclusion order. Therefore, the ITC argues that no absurdity results from the ITC’s ability to issue a cease and desist order for an act which it could not prohibit using an exclusion order.

The fact that Congress has granted the FCC with much power to regulate telecommunications is of no significance according the ITC’s brief. The ITC cites to other agencies whose power coextends in certain realms; for example the FTC and the ITC itself have historically shared jurisdiction on many non-patent import issues. The ITC argues further that it should be given deference in interpreting its own enabling statute, citing to a case where the Supreme Court overturned a Federal Circuit decision for not deferring to the Commerce Department’s interpretation of its enabling statute.

The ITC rounds out its argument by distinguishing Bayer AG v. Housey Pharmaceuticals, Inc., 340 F.3d 1367 (Fed. Cir. 2003), where the Federal Circuit held that 35 U.S.C. § 271(g) could not ban the import of information gleaned from use a patented method. The ITC seizes on language in Bayer that describes the issue in that case being importation of “information in the abstract.” The ITC, citing district court cases that have followed Bayer, believes that this focus distinguishes Bayer. In other words, the ITC argues that in this case, the data sets at issue are not abstract. Rather, ClearCorrect directly uses the data sets to create an infringing device. Unlike data in the abstract, the data sets can be bought and sold. Further, argues the ITC, is that while the Federal Circuit mentioned section 337 in dicta in Bayer, it based its entire analysis and holding on section 271(g). Particularly, because Bayer rested on section 271(g)’s “product made” clause, the ITC believes it has no significance to the interpretation of section 337’s “article” term, which does not include a manufactured qualifier.

The ITC concludes by quelling fears about the reach of its cease and desist order. It points out that its order does nothing to burden the internet service providers who filed amicus briefs. To be effected by an ITC cease and desist order, the ISPs would need to be named in it. Post-Kyocera, the ISPs could only be named in the cease and desist order if they were also named respondents in the underlying ITC investigation.

What the Federal Circuit ultimately decides in this case could have significant impact on the scope of relief that the ITC can offer as a forum going forward. Oral argument in the case is expected this summer, with a decision expected to issue in the fall.

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Andrew Kopsidas, a Principal in the Washington, D.C. office of Fish & Richardson, leads and tries intellectual property cases and offers strategic counseling to clients. He has successfully litigated cases in many federal district courts and the U.S. International Trade Commission (ITC).
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